WTO distributes ruling in Airbus subsidies case

[Pieter C. 5]

WTO Distributes Ruling In Airbus Subsidies Case

 

September 4, 2009

 

The WTO on Friday issued a 1,000-plus page ruling on whether subsidies the EU gave to Airbus were illegal, although the findings will not officially be made public for months.

 

"It's gone," World Trade Organisation spokesman Keith Rockwell said after hard copies of the confidential report were distributed to US and European diplomats in Geneva. "We have it now. We are looking into it," one Geneva-based EU official said.

 

The three-member WTO panel was widely expected to agree with complainant Washington that billions of euros of "launch aid" Airbus received to build the A380 and other top-selling planes was anti-competitive and broke trade laws.

 

The Airbus case, and the European Union counter-claim about US support to Boeing, represent the most commercially significant dispute in WTO history.

 

While not commenting on the findings, officials in Brussels stressed a full picture of the aircraft subsidy dispute would only become clear after the initial ruling is released from the case against Boeing, expected in six months.

 

"It is important to recall that this report is only half the story and must be read together with an interim report on the EU case against the US over aid to Boeing," said Luiz Guellner, spokesman for EU Trade Commissioner Catherine Ashton.

 

Neither Boeing nor Airbus had an immediate comment on the Friday ruling. The Office of the US Trade Representative also declined to comment on the specific ruling, but said it "has always maintained that the European governments have provided unfair subsidies to Airbus that harm US interests."

 

It could take years for the WTO dispute settlement mechanism to run its course, and most industry analysts expect Boeing and Airbus to negotiate a settlement in their long-running dispute before it reaches the WTO's top court.

 

The extent to which Airbus or Boeing comes out cleaner than the other in the twin preliminary rulings will affect the dynamics of those settlement talks, which both sides have said they eventually want to hold.

 

Before the WTO ruling was circulated on Friday, Airbus spokeswoman Maggie Bergsma said "the window is closed" for such talks until the trade arbiter reaches an initial verdict in the Boeing case, which Washington is expected to lose.

 

"We look forward to a negotiated settlement in which both sides recognise the way this industry works," she said.

 

$205 BILLION BOOST?

 

Boeing says Airbus got a cumulative boost of USD$205 billion from advantageous loans and other perks from France, Germany, Spain and Britain over two decades, giving it an unfair edge.

 

Airbus says the loans were fair and claims in turn that Boeing got illegal subsidies from US agencies including NASA plus big tax breaks from several states, worth some USD$24 billion.

 

If the panel strikes down launch aid, Airbus may have fewer options to finance new airliners such as the wide-body A350 due in the next decade. Such a decision would also affect how rivals in Brazil, Canada, China, Russia and Japan fuel their expansion.

 

"Of course we will be very interested because it may affect the way others operate," Brazilian Foreign Minister Celso Amorim said before the ruling was issued. Brazil's Embraer and Canada's rival Bombardier spent years embroiled WTO litigation over aircraft subsidies.

 

(Reuters)

 

Boeing Tanker Backers Seize On WTO Ruling

 

September 4, 2009

 

Backers of Boeing pushed the Pentagon on Friday to factor an international trade ruling into a renewed competition between the US aerospace giant and its European rival, Airbus.

 

At stake is a projected USD$35 billion contract to supply mid-air refueling aircraft to the US Air Force, which intends to purchase an initial 179 aircraft to start replacing its KC-135 fleet.

 

The Defence Department is expected to kick off the re-competition this autumn.

 

Lawmakers from states that stand to gain jobs if Boeing wins the tanker deal this time did not wait for an official US readout of the confidential, preliminary World Trade Organisation report on alleged illegal subsidies to Airbus.

 

Instead, they said the US Defence Department must take into account what they described as the WTO's pro-Boeing findings before awarding the long-delayed tanker contract.

 

Boeing would vie again for the contract against a trans-Atlantic team made up of Northrop Grumman and Airbus parent EADS, which is offering a modified Airbus A330.

 

Relatively early on in the previous tanker selection saga, the Defence Department decided that the WTO decision would not factor into the selection of a winner in the tanker competition.

 

US Rep. Norm Dicks, a Democrat from Washington state, where Boeing does much of its aircraft manufacturing, said on Friday that turning a blind eye was not acceptable in light of the WTO ruling such as he described it.

 

"The US government cannot reward illegal market actions that have harmed US manufacturers and stolen US aerospace jobs," he said in a statement.

 

Todd Tiahrt, a Republican from Kansas -- where the Boeing tankers would undergo final assembly -- added: "The Department of Defence can no longer put its head in the sand and ignore internationally confirmed illegal subsidies that have for years tipped the scales in favour of European workers."

 

Tiahrt said he had been briefed on the ruling by the Office of the US Trade Representative.

 

"It is time to move forward with the only clear solution to the replacement of the KC-135 aerial refueling tanker," he said, referring to the 767 offered by Boeing in the last competition. "We need an American tanker built by an American company with American workers."

 

Senator Patty Murray, a Washington Democrat, said the Defence Department "needs to answer to how this violation of WTO rules will be considered in the competition for the vital aerial refueling tanker."

 

The Defence Department declined to take a stance.

 

"It would be inappropriate to comment on any findings that have not been made public," said Cheryl Irwin, a Pentagon spokeswoman.

 

Dicks said the interim ruling from a three-person WTO panel "definitively" upheld a US contention that European jet-maker Airbus received illegal subsidies to the detriment of Boeing, the No. 1 US export earner.

 

His statement followed consultations with US officials who had read the ruling, said George Behan, a spokesman for Dicks.

 

On the other side of the tanker tussle, US Senator Richard Shelby, a Republican from Alabama -- where an Airbus-based tanker would be assembled if Northrop wins the contract -- said the WTO findings were irrelevant.

 

"It is important to remember that this preliminary report pertains to an ongoing dispute involving civil -- not military -- aircraft," Shelby said.

 

"Whatever its findings, they should not affect the upcoming tanker acquisition," he added. "Any attempt to conflate these two separate processes detracts from that paramount goal" of buying the best tanker.

 

Analysts said it may take many years to reach a resolution on the trade dispute, making it hard for the Pentagon to weigh the dispute in its calculations.

 

"Both the US and Europe view aerospace as strategic industries, and I doubt that either would want to unilaterally concede anything on this funding issue," said Rob Stallard, an analyst at Macquarie Research.

 

(Reuters)

 

Key Dates In Airbus-Boeing Subsidy Dispute

 

September 4, 2009

 

The WTO delivered a preliminary finding on Friday on whether Airbus benefited from illegal European subsidies to develop airliners in competition with Boeing.

 

The ruling is expected to be followed in the next six months by a World Trade Organisation decision in a counter-suit brought by the EU over alleged US support for Boeing aircraft.

 

Here is a timeline of the dispute between Airbus and Boeing.

 

October 2004 - Washington files a case challenging European loans to help Airbus develop aircraft and terminates a 1992 civil aircraft agreement covering government support for the two top aircraft manufacturers.

 

-- The EU files a counter-complaint against US support for Boeing.

 

December 2004 - Airbus wins shareholder approval to start seeking orders for a fuel-saving, wide-body jet to be called the A350, unleashing a fresh marketing battle against Boeing.

 

-- Airbus says it is entitled to apply for a third of the A350 development cost under a 1992 European Union-United States trade deal, but Boeing maintains that deal is dead.

 

March 2005 - The US and Europe trade accusations in an escalation of the row over subsidies for aircraft rivals Boeing and Airbus that risks souring ties.

 

-- Washington wants Europe to stop providing "launch aid" loans to Airbus, worth some USD$15 billion since 1967. Brussels argues Boeing benefits from its own form of aid, such as Washington state tax breaks and federal government contracts.

 

May 2005 - The US reactivates its WTO case against European subsidies for Airbus after fresh efforts to reach a negotiated settlement with Brussels fail. The EU says the next day it will reactivate its legal case against US support for aircraft maker Boeing in a tit-for-tat riposte.

 

July 2005 - The WTO launches twin probes into state aid for Boeing and Airbus in what is billed as the biggest trade dogfight ever, but both Washington and Brussels reaffirm they are still ready to negotiate a deal.

 

August 2005 - The US administration urges Britain not to pledge government support to Airbus.

 

September 2005 - Airbus chief executive Gustav Humbert says he is confident European governments would lend the planemaker almost EUR1.5 billion euros (USD$1.8 billion) to develop its A350.

 

July 2006 - Airbus unveils a USD$10 billion revamp of its planned A350 and says it would seek government aid from its partner countries, France, Germany, Spain and Britain.

 

June 15, 2009 - Airbus takes a step closer to winning government loans as France, Germany, Britain and Spain say they aim to decide by the end of June how much money they are prepared to put up to help the A350 project.

 

-- Germany is prepared to provide EUR1.1 billion and France would contribute EUR1.4 billion.

 

-- Boeing says government financing would violate WTO rules.

 

August 14, 2009 - Britain pledges GBP340 million pounds (USD$565 million) in loans.

 

Aug 27, 2009 - Boeing says it hopes the preliminary WTO panel ruling will force European governments to reconsider plans to help finance the Airbus A350.

 

(Reuters)

 

US Says Airbus Subsidies Have Harmed Boeing

 

September 4, 2009

 

The United States confirmed on Friday it has received a confidential WTO ruling in its multi-billion dollar complaint against European government support for Airbus.

 

"We are still reviewing the interim report, which is over 1,000 pages long. Because the interim report is confidential, we cannot discuss the contents," said Debbie Mesloh, a spokeswoman for the US Trade Representative's office.

 

"The United States has always maintained that the European governments have provided unfair subsidies to Airbus that harm US interest," Mesloh added, alluding to Airbus's US rival Boeing, which pressed the USTR to bring the case.

 

"In this dispute, the United States is challenging dozens of measures providing over billions of dollars in subsidies to Airbus, including launch aid to every major Airbus aircraft model," she added.

 

Since the United States brought the case in 2004, the governments of France, Germany, Spain and Britain have continued to provide contested "launch aid loans" for Airbus.

 

The European aircraft manufacturer's latest project is the A350 wide-body jet. Boeing officials have said they hoped Friday's confidential decision would halt some USD$4 billion in European launch aid loans for that aircraft.

 

"The dispute has proven to be one of the most complex and lengthy disputes under the WTO," Mesloh said.

 

(Reuters)

[Pieter C. 5]

WTO Raps European Export Aid For Airbus

 

September 6, 2009

 

The WTO has found that loans from European governments to Airbus were not only unfair subsidies but in some cases violated a tougher ban on export aid, according to sources familiar with a report that also rejected some US complaints.

 

The findings are contained in a confidential interim report distributed by the World Trade Organisation to the parties in a row between the United States and European Union over aircraft subsidies that could affect planemakers worldwide.

 

US lawmakers briefed on the report said on Friday that the WTO had ruled against European government loans for Airbus, backing claims that they harmed Boeing. European sources denied there had been a clear-cut result.

 

Picking apart the contrasting claims, two sources familiar with the case said the draft conclusions of a five-year WTO probe overwhelmingly backed US charges that the dozen or so loans were "actionable" subsidies that harmed Boeing.

 

Washington won a partial victory on a second key claim: that most of the same loans further violated WTO rules by amounting to prohibited export subsidies, the sources said. The extent of the US victory on this point remained unclear.

 

SUPERJUMBO

 

Under trade rules, "prohibited" subsidies must be dismantled or amended swiftly after the conclusion of a case without the complainant needing to prove its firms were harmed. "Actionable" subsidies are seen as harder to attack and remedies are slower.

 

At least one of four loans given by European governments to help fund the A380 superjumbo was cleared of being a banned export subsidy, but the rest were found illegal, sources said.

 

Washington however lost a third claim: that the overall use of European loans was an invalid programme of support in its own right, several sources familiar with the matter said.

 

The United States had not only attacked the individual loans but claimed they were part of a concerted and open-ended system in a bid to implicate future loans for Airbus's future A350, which fell outside the jurisdiction of the WTO complaint.

 

Washington is expected to protest those loans separately.

 

The United States broadly won its case against European Union research and development funding for Airbus, as well as infrastructure projects that Washington regards as a covert boost for the European planemaker, two of the sources said.

 

R&D spending and infrastructure projects in the United States are also at the centre of an EU counter-claim against the United States. The process is about six months behind the US case against Airbus, though the two are not officially linked.

 

The United States lost its case against loans by the European Investment Bank awarded to Airbus, the sources said.

 

None of the sources agreed to be identified because no one is authorised to speak publicly about the WTO findings ahead of their publication in several months.

 

The United States and European Union said on Friday they would not comment on the findings in the 1,000-plus page report, which was passed to them for comments ahead of a final ruling.

 

Airbus and Boeing declined comment. The European Investment Bank was unavailable for comment.

 

(Reuters)

[Pieter C. 5]

Airbus is in the news again

 

Airbus Denies 2012 Outsourcing Goal

 

October 12, 2009

 

Airbus said a report it planned to transfer 20 percent of its engineering work to India and elsewhere by 2012 was wrong, but reaffirmed longer-term plans to shift work abroad.

 

Indian newspaper The Mint reported on Monday that Airbus would move a fifth of its engineering and design activities to low-cost countries, the majority of it to India, by 2012.

 

"This report is incorrect. The EADS 2020 Vision envisages up to 20 percent of Airbus work could be subcontracted globally by 2020 but this is not new," Airbus spokesman Justin Dubon said.

 

Airbus carries out most of its work in the four countries that founded it as a consortium 40 years ago -- Britain, France, Germany and Spain. It is part of listed group EADS.

 

Announced in January 2008, Vision 2020 is a 12-year plan to "rebalance" the parent group as a global company with less reliance on airliner sales for its revenues and on high-cost European factories for its engineering and production work.

 

The overhaul would curb the exposure of Europe's largest aerospace group to both a weak dollar and civil aviation business cycles, and result in about a fifth of its workforce being located outside Europe compared with a fraction of that now.

 

In India, Airbus employs 130 people at an engineering centre and nearby training facility in Bangalore and plans to increase this to 400 people by 2012, Dubon said.

 

The facility helps to speed up design work in Europe by improving simulation of flight management and other systems.

 

(Reuters)

[Pieter C. 5]

WTO finding on A380 'subsidies' leaves both US, EU declaring victory

 

July 1, 2010

 

The World Trade Organization yesterday publicly released its final ruling on the US's 2004 claim that Airbus received state aid for the A380 program in violation of international trade rules, siding with the US that Airbus was given "prohibited export subsidies" to help it develop and build the extra-large aircraft but also rejecting US charges that the subsidies had caused "injury" to Boeing.

 

As was the case when it was released confidentially to the US government and European Commission three months ago, the WTO's complicated ruling left room for both sides to declare victory.

 

Pointing to the pending WTO interim report on the EU's 2005 counterclaim that Boeing receives de facto subsidies through tax breaks and US government contracts, expected to be released within the next several months, Airbus said the only way to resolve the long-simmering trade dispute is through "negotiations without any pre-conditions."

 

Boeing, on the other hand, said the decision was a "sweeping legal victory" requiring "full compliance" from Airbus. "The [WTO] panel said that without the illegal subsidies it received, Airbus would not have the aerospace market share it now enjoys," Boeing Executive VP and General Counsel J. Michael Luttig said. "Under today's decision, Airbus must repay the $4 billion in illegal launch aid it received for the A380 or restructure the A380's financing to proven commercial terms. Likewise, Airbus must abandon its plans to finance the A350 through the use of illegal subsidies."

 

US Trade Representative Ron Kirk said, "These subsidies have greatly harmed the United States, including causing Boeing to lose sales and market share."

 

In fact, the ruling does explicitly state that "the effect" of A380 "subsidies" from the UK, France, Spain and Germany "is to displace the imports of [boeing aircraft] into the European market" and "to displace the exports of [boeing aircraft] from the markets of Australia, Brazil, China, [Taiwan], Korea, Mexico and Singapore…[and] India." This led to "significant lost sales…constituting serious prejudice to the interests of the United States," WTO said.

 

But the ruling also stated that the US had "not established" a number of its claims, including that the "effect of the subsidies is a significant price undercutting by the subsidized product" or that "through the use of the subsidies" the EC or EU member states "cause injury to the United States' domestic industry."

 

The EC seized on this portion of the report, stating that "the WTO panel has found that European support did not result in any job losses in the United States or lost profits to the US aircraft industry...It has found that EU support did not damage Boeing's pricing or profitability and did not lead to a loss of jobs at the company."

 

While the EC said it is "disappointed with certain of the panel's findings" that it is considering appealing, EU Trade Commissioner Karel De Gucht said the final report can only be fairly interpreted when it is "read together with the forthcoming interim report on subsidies provided in the USto Boeing." She added that the EU "remains committed to a negotiated outcome to the dispute."

 

The US Aerospace Industries Assn. said the ruling makes clear that the EU's "systematic subsidization must be abandoned going forward …The ruling also sends a clear message to those WTO member countries developing, or considering developing, civil aviation production that free and fair trade principles matter and will be enforced."

 

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WTO Panel Slams EU Aid For Airbus

 

June 30, 2010

 

WTO judges gave the European Union a stinging rebuke on Wednesday, saying the EU must stop prohibited export subsidies to Airbus which had injured US rival Boeing.

 

The World Trade Organisation panel concluded Airbus had only been able to launch a series of passenger jets thanks to subsidies from the EU and member states Britain, France, Germany and Spain, without which it would be a very different and much weaker company.

 

The ruling marks a big setback for Airbus, but is not the end of its battle -- the world's largest and costliest trade dispute -- with Boeing over subsidies in the market for large civil aircraft worth USD$3 trillion over the next 20 years.

 

"These subsidies have greatly harmed the United States, including causing Boeing to lose sales and market share. Today's ruling helps level the competitive playing field with Airbus," US Trade Representative Ron Kirk said in a statement.

 

"President Obama and I are committed to enforcing our trade agreements and, when necessary, using the dispute settlement process that is consistent with the rules-based global trading system at the World Trade Organisation."

 

If the ruling is upheld on appeal and the EU refuses to stop the offending practices, the United States could ask the WTO for permission to impose sanctions on EU goods.

 

The WTO panel found that British, German and Spanish aid to Airbus for its flagship 525-seat A380, the world's largest airliner, amounted to illegal export subsidies and must be corrected within 90 days. Boeing estimated the loans at USD$4 billion but Airbus declined to provide an estimate.

 

The WTO found that British, Spanish and German loans for the A380 contained illegal export aid but cleared a French loan.

 

AIRBUS: NO REQUIREMENT

 

Allan McArtor, chairman of Airbus Americas, said the company was not obligated to repay any subsidies found by the WTO panel or any outstanding government loans.

 

"There is no requirement to repay anything in the WTO process," McArtor said in an interview.

 

The ruling, which is subject to appeal, only imposes a "forward-looking" obligation on European governments that provide launch aid for Airbus, he said.

 

The European Commission said it would decide shortly whether to appeal the 1,000-page Airbus ruling, and reiterated a call for negotiations, while Airbus stressed the ruling did not mean it would have to return any development aid any time soon.

 

"The EU remains committed to a negotiated outcome to the dispute with no pre-conditions on either side," EU Trade Commissioner Karel De Gucht said in a statement in Brussels.

 

USTR General Counsel Tim Reif said the United States was prepared to meet the EU "at any point to work on the problems raised by the panel report."

 

The WTO said prohibited subsidies should be halted immediately and said this meant 90 days; but the legal process could mean months or years before this deadline is reached.

 

Airbus officials said there were grounds for an appeal.

 

TANKER DISPUTE

 

Final resolution of the two cases may well shape the civil aviation market, where Airbus and Boeing have together nearly USD$1 trillion of aircraft on their order books, for years to come.

 

More immediately, it could fuel a row in the United States over one of the biggest defence deals in history.

 

Both Boeing and Airbus parent EADS are due to submit bids by July 9 for a contract worth up to USD$50 billion for new tankers for the US Air Force, based on converted passenger jets.

 

The EADS offering is based on the Airbus A330 -- one of the planes found to have been unfairly subsidised -- and Boeing is already making much of this, although it remains to be seen to what extent this will sway the Pentagon.

 

Wednesday's report followed months of leaks and both sides rushed out their interpretations even before the 1,050-page documents were wheeled out for reporters in Geneva.

 

A first confidential report in a countersuit brought by the EU against US support for Boeing is expected on July 16.

 

Boeing said the ruling proved that Airbus had only been able to take market share from Boeing -- nudging it out of number one place in the process -- because of subsidies.

 

"It has struck at the heart of subsidies for Airbus, held that they are illegal, and must end forthwith," Boeing general counsel J. Michael Luttig said.

 

FOCUS ON AIRBUS A350

 

Airbus and France, where the company is based, said the funding system itself, which is based on government loans to be paid back as planes are sold, had not been faulted.

 

"Neither jobs nor any profits were lost as a result of reimbursable loans to Airbus," the company said.

 

The case did not cover Airbus's future A350 airliner, but Boeing said the ruling would prevent European governments from paying similar loans to develop that plane. Airbus denied this and said it would press ahead with talks on setting up loans.

 

US trade officials said it would be "very disappointing" for European governments to provide launch aid loans for the A350 in light of the WTO's ruling.

 

But Airbus's McArtor said European governments have already pledged they would make any new launch aid loans for Airbus comply with WTO rules.

 

"If the USTR is disappointed in that, I'm sorry. That's the way they do business in Europe and the panel found that such loans are perfectly compliant... as long as they are under acceptable terms," McArtor said.

 

The United States could demand to see the terms of any loans for the A350 to ensure they do comply with the ruling, said Robert Novick, a partner at WilmerHale who has represented Boeing in the dispute.

 

Both sides have 30 days to appeal the ruling.

 

The report -- and its 90-day deadline to withdraw the subsidies -- does not come into effect until it is officially adopted by the WTO membership, after any appeal process.

 

(Reuters)

 

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Main Conclusions Of WTO Panel On Airbus Aid

 

June 30, 2010

 

The following are the main conclusions of the WTO panel that ruled in the complaint brought by the United States against the European Union over aid for Airbus civil aircraft.

 

The report, of more than 1,000 pages, was published on Wednesday after being issued confidentially to the United States and EU on March 23. The panel, which was chaired by Uruguay's former ambassador to the WTO, Carlos Perez del Castillo, was formed in 2005.

 

The United States had complained that the development and marketing of Airbus airliners was only possible thanks to a programme of "launch aid" and other financial support by the EU and some of its member states on non-commercial terms.

 

It said this aid comprised illegal subsidies, which hurt the US civil aircraft industry by depriving it of market share.

 

"LAUNCH AID"

 

* The panel agreed that support for the Airbus A300, A310, A320, A330, A340 and A380 airliners constituted launch aid.

 

* It did not agree that support for the A350 was launch aid, as it did not examine the A350 programme, launched after the complaint was filed.

 

* It found that the United States had not proved that there was a coherent, systematic launch aid programme.

 

SUBSIDIES

 

* The panel found that German, British and Spanish funding for the A380 airliner amounted to de facto export subsidies.

 

* It disagreed that French aid for the A330, A340 and A380 and Spanish aid for the A340 were export subsidies.

 

* It did not agree that the export subsidies were based on a legal requirement to export -- i.e. that funding was formally conditional on achieving exports.

 

* It disagreed that loans by the European Investment Bank (EIB) to the Airbus programme amounted to specific subsidies under WTO rules.

 

* It found that some but not all infrastructure spending by member states was a specific subsidy to Airbus.

 

* It found that the transfer of the German government's 20 percent stake in Deutsche Airbus to KfW, a state-owned bank, and then to MBB, subsequently acquired by Daimler, was a specific subsidy. In particular, KfW's sale of the stake in 1992 to MBB was below market rates.

 

* It disagreed that debt forgiveness by the German government was a specific subsidy.

 

* It agreed that equity infusions by the French government and Credit Lyonnais were specific subsidies.

 

* It agreed that the 1998 transfer of the French state's 46 percent state in Dassault Aviation to Aerospatiale was a specific subsidy.

 

* It agreed that some but not all research and development spending on the Airbus programme was a specific subsidy. (The panel estimated the total value of R&D spending at about EUR€750 million, against a US claim of EUR€2 billion and an EU estimate of EUR€381 million.)

 

MARKET IMPACT

 

* The panel found that Boeing's share of sales of large civil aircraft to the EU market declined while Airbus's increased over the period under review (2001-2006)

 

* It found that imports of Boeing to the EU were displaced by Airbus.

 

* It found that Airbus displaced Boeing sales in Australia, China, and India, and to a lesser extent in Brazil, Mexico, Singapore, South Korea and Taiwan.

 

* It found that the United States did not prove that Airbus had undercut prices.

 

* It agreed the Airbus programme had led to the suppression or depression of prices for Boeing 737, 767 and 747 airliners but not the Boeing 777. (Suppression is when prices are prevented from rising, depression when they are pushed down.)

 

* It agreed with the United States that launch aid shifted the risk of launching aircraft to the government from the manufacturer through non-commercial funding.

 

* It agreed with the United States that Airbus's ability to launch each model was dependent on subsidies.

 

* It agreed that Airbus could not have marketed planes when it did without specific subsidies from the EU, Britain France, Germany and Spain.

 

* It concluded that if Airbus had launched and marketed the planes without subsidies it would have been a much different and weaker company.

 

* It found that without subsidies Airbus would not have had the market share it did in 2001-2006.

 

* It found that without the Airbus subsidies, the United States would have had a bigger share in EU and third markets.

 

* It found that Airbus's market share was a result of subsidies.

 

* It disagreed with the United States that the subsidies allowed Airbus to price more aggressively (i.e. any suppression or depression of prices was not caused by subsidies).

 

IMPACT ON US INDUSTRY

 

* It agreed that the subsidies had displaced Boeing in EU and third markets, causing "serious prejudice" to the United States.

 

* It disagreed that the subsidies led to price undercutting, suppression or depression.

 

* It found that Boeing recovered in 2005-2006 after performing poorly in 2001-2003 so there was no material injury to US domestic industry.

 

* It found that the EU had nullified and impaired benefits to the United States that it was entitled to under WTO agreements.

 

RECOMMENDATIONS

 

* The panel recommended that prohibited export subsidies be withdrawn "without delay" and said this meant within 90 days of adoption of its report by the WTO.

 

* It said the EU should remove the adverse effects of subsidies or withdraw subsidies causing adverse effects.

 

* It made no recommendations on how the EU should do this (and the United States. did not ask for recommendations)

 

(Reuters)

 

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What Next In The Airbus Dispute?

 

June 30, 2010

 

A WTO panel issued a damning report on Wednesday in the dispute between the United States and European Union over EU subsidies for Airbus civil aircraft.

 

What happens next?

 

* Does Airbus have to repay the subsidies?

 

The WTO does not usually require subsidies that have already been handed out to be repaid.

 

But it does require an immediate end to prohibited export subsidies and the withdrawal of other subsidies or their adverse effects on the United States.

 

* Does it mean the export subsidies have to stop immediately?

 

The WTO panel defined immediately as "within 90 days". But that is within 90 days of its report being "adopted" -- approved by the entire WTO membership, which could be some months away.

 

Cases involving prohibited export subsidies enjoy an accelerated process at the WTO.

 

A report is adopted within 30 days of being circulated -- unless it is appealed. (In other cases the deadline is 60 days.) The appeal can be at the last minute. The EU is likely to appeal as it has nothing to lose and will gain time.

 

The WTO's appellate body then has 60 days to rule (against 90 days in cases not involving prohibited subsidies).

 

The appellate body's report must be adopted within 20 days (against 30 days in other cases).

 

If the case is complex the appellate body -- the WTO's top court -- may take longer. The original panel was supposed to produce its report within 90 days and took nearly five years.

 

* How does Airbus end the prohibited subsidies and withdraw the other ones?

 

The WTO did not make any specific recommendations on this.

 

In practice Airbus would probably have to put outstanding loans and other funding onto a commercial footing, for instance renegotiating the interest it pays.

 

* Can Airbus subsidise other planes?

 

The report covers funding for Airbus between 2001 and 2006, so it does not look at funding for its new A350 widebody jet.

 

Airbus is currently negotiating loans to pay for the A350.

 

US and Boeing officials say the ruling will ensure these are not unfair subsidies too.

 

What is certain is that American lawyers will scrutinise the funding of the A350 and any other Airbus planes, and if they think it is unfair and launch a new challenge, they will be able to cite case law from this dispute.

 

* How does it affect the US military tanker contest

 

Airbus parent EADS is bidding against Boeing to win a USD$50 billion contract to supply tankers to the US Air Force. The EADS bid is based on the A330, which the WTO panel found had been illegally subsidised.

 

Boeing is making the most of this to argue that the EADS bid is unfair, but it remains to be seen whether this will sway the Pentagon.

 

* What about other countries?

 

Boeing officials say this case will also lay down a marker for countries such as Brazil, Canada, China and Russia that are thinking of entering the large civil aircraft market.

 

* So what happens next?

 

The confidential interim report in the EU's countersuit against the United States over subsidies for Boeing is now expected on July 16. The final report could be published later this year or early next.

 

That is likely to find the US guilty of illegal practices too -- although Boeing officials insist the EU subsidies are much more serious than what is at stake with Boeing.

 

At that point the two parties may decide to negotiate a settlement to their differences over the funding of large civil aircraft, although the WTO rulings will still be available to other countries that want to challenge them.

 

(Reuters)

[flee 5]

Boeing has always enjoyed subsidies in the form of highly priced military contracts - profits from military sales to the US and foreign governments help to fund their civil airliners (some of which also serve military purposes). Airbus does not have that kind of military business and is only starting out with its first programme, the A400M.

 

In any case, I am sure the EU will try to drag this along until another WTO case involving Boeing is decided. In the end both companies might not get any benefit but we get more transparency instead.

[Pieter C. 5]

Airbus Moving At Full Speed On A350 Funding

 

July 1, 2010

 

Airbus said it was moving forward at "full speed" in talks with European governments over funding for the A350 and denied this was prevented by Wednesday's trade ruling on aircraft subsidies.

 

The World Trade Organisation found that Airbus had received prohibited export subsidies for the A380 superjumbo and ordered these to be remedied. It also found subsidies in other development loan payments for previous models.

 

The case did not cover Airbus's future A350 airliner, but rival Boeing said the ruling would prevent European governments from paying similar loans to develop that plane.

 

"Boeing's wishful thinking to the contrary, the A350 is untouched by the WTO's findings. Together with the four governments, we are moving forward at full speed," Airbus head of communications Rainer Ohler said in an email on Thursday.

 

"Finalisation and timeline of an announcement are strictly in the hands of the governments; therefore we can't comment about it," he added.

 

Boeing spokesman Charlie Miller responded that the WTO ruling had established rules for future aircraft funding.

 

"The WTO held that every instance of launch aid challenged was an illegal subsidy that distorted the market and violated WTO rules. The legal principle is clearly set," he said.

 

Boeing said on Wednesday the ruling meant Airbus must repay USD$4 billion in A380 loans or restructure them and that it must abandon what it described as Airbus's plans to use illegal subsidies for the A350.

 

Airbus said the WTO had not ruled that the loan system itself was at fault.

 

Host nations France, Germany, Spain and Britain said last month they would consider WTO-compliant funding for the A350 once the trade body had ruled on the US case against aid to Airbus as well as a counter-claim against aid to Boeing.

 

(Reuters)

 

-----------------------------------------------------------

 

EU Wins Name Spat In Airbus Subsidy Row

 

July 1, 2010

 

A bureaucratic spat over just one letter in Europe's identity has been solved despite failure to reach agreement in a major trade row over aircraft subsidies.

 

The European Union has complained about the "irritating US habit" of referring to the 27-nation trade bloc under the term "EC," which is short for European Communities, according to a World Trade Organisation report unveiled on Wednesday.

 

The bloc officially changed its name to the European Union -- or "EU" -- in December 2009, when the 2007 Lisbon Treaty came into force. But in practice the new name has been used by Europeans for almost 20 years.

 

The EU complained about Washington's use of the older term "EC" as part of more than 1,000 pages of newly released submissions and findings in the world's biggest trade dispute, in which the WTO found Airbus had received illegal subsidies.

 

The complaint gave rise to careful consideration by judges at the Geneva-based WTO, which exists to protect free trade but tries to do so without offending its 150 member nations.

 

The trans-atlantic aircraft subsidy dispute has been running so long most submissions pre-dated the European name change and is likely to drag on even longer through further appeals.

 

In a compromise the WTO decided to use the term EC in the report, but to add a footnote saying the EC was now the EU.

 

In other sensitive areas, it was instructed by European officials to refer to a factory in Wales rather than Britain and to ensure government departments were "UK" and not "British."

 

"Sometimes these reports are all about the art of the trivial," commented a European aviation industry official.

 

(Reuters)

[BC Tam 2]

..... siding with the US that Airbus was given "prohibited export subsidies" to help it develop and build the extra-large aircraft but also rejecting US charges that the subsidies had caused "injury" to Boeing.

If that is to be believed, the insinuation is there that the A380 has been such a commercial failure to date that it has had no detrimental effect upon its one and only competitor, the 747

[flee 5]

Who won at the WTO?

By Murdo Morrison

 

The World Trade Organisation's final report into state subsidies to Airbus raises two key questions: who won, and what effect will it have on the way the European airframer's multi-billion dollar programmes are funded?

 

There is a third: will the ruling - published on 30 June - derail Airbus parent EADS's attempts to sell its A330 tanker to the US government, whose Office of the US Trade Representative initiated the WTO investigation in 2004, or compete in future Department of Defense contests.

 

Surprisingly, given the emphatic way both sides claimed victory, or vindication, neither of the first two are clear. Although the USA has triumphed in at least some of the crucial legal arguments, what that means for the competitive landscape is uncertain.

 

As far as the KC-X tanker contest is concerned, it is evident that Boeing's supporters in Congress, the unions and the media will step up their campaign - begun when the WTO's interim findings emerged last September - to stop the US military choosing a foreign supplier they claim has been able to challenge a domestic rival only as a result of unfair subsidies. Indirectly, that could be the biggest punch Boeing has landed on its opponent.

 

Given the extent to which details of the report have already emerged in recent months, the report's content contained few surprises. Essentially, the WTO panel investigating the case has found that a series of loans to Airbus over the years, including reimbursable launch aid for the A380 and other infrastructure grants, did break international trade rules enshrined in the so-called Subsidies and Counterveiling Measures (SCM) agreement. However, crucially the WTO rules that A350 launch aid - agreed after the case began in 2004 - has not so far been illegal.

 

The Geneva-based organisation - an umpire in trade disputes - also finds that the effect of the subsidies constituted "serious prejudice to the interests" of the USA in terms of it being able to sell its exports in Europe and other world markets.

 

It recommends that all prohibited subsidies should be withdrawn within 90 days.

 

However, importantly but rather confusingly, the WTO says the USA has failed to establish that the effect of the subsidies led to "significant price undercutting" or "significant price depression" by Airbus, and that the funding caused "injury" to the US aerospace industry.

 

Not surprisingly, Airbus and Boeing put very different spins on the findings and what should happen now. Boeing chief executive Jim McNerney hailed the report as "a landmark decision and sweeping legal victory over the launch aid subsidies that fuelled the rise of Airbus and that continue to provide its products a major cost advantage", adding: "We now join the US government in urging full compliance with the ruling and a permanent restoration of fair competition within our industry."

 

Airbus retorts that the WTO has rejected seven in 10 of the US claims and that the panel agreed that subsidies did not cause "material injury" to Boeing in terms of lost jobs or profits.

 

What happens now is also uncertain. Boeing is unstinting. "Airbus must repay $4 billion in illegal launch aid it received for the A380 or restructure the A380's financing to proven commercial terms," it says, also warning that Airbus must not resort to illegal subsidies to finance the A350. Although it expects Europe to appeal against the ruling, it says that process should be concluded by the end of 2010.

 

Airbus, however, expects the dispute to "continue for a few more years", partly because of Europe's corresponding case against alleged illegal subsidies to Boeing, which a separate WTO panel is expected to report on later this year, and has called again for both sides to negotiate a new agreement to replace the 1992 deal.

 

"Only the availability of the report on the parallel case will bring the necessary balance to allow for a possible start of negotiations, without any preconditions," says the airframer, adding that "resolution will finally only be found in transatlantic or even multilateral negotiations".

 

Those multilateral negotiations could be key. The glacial pace of the deliberations so far have meant that the investigation has not kept up with the changing business landscape. Since the lawyers got to work in 2004, Airbus has launched the A350 and Bombardier the CSeries while the Chinese are developing the Comac C919. The Russians, Chinese and Japanese all have regional jet programmes.

 

Ian Godden, chairman of UK trade body ADS, says it is "sad" that industries in the West are "distracting themselves with an internal dispute, while countries elsewhereare developing competitor aircraft", all with state support. "The trade dispute has the potential to tie up existing market leaders while such newcomers take market share," he adds.

 

Ian Giles, an aviation lawyer at London-based law firm Norton Rose, who has been following the case, says the ruling represents a defeat for Airbus "but it is a long way from the end of the story".

 

He adds: "Airbus has already said it does not believe the ruling impacts on funding plans for the A350 - Boeing clearly do not agree, and so another chapter in the dispute is likely to be played out before the WTO. As has been the case throughout this dispute, both sides are trying to portray the WTO ruling in their favour.

 

"For Boeing, the WTO finding that the interest rates granted by the EU governments were so far below market rates as to be illegal is a positive, while for Airbus, the finding that these type of state-backed loans are not per se illegal will give them hope that they can restructure the funding with minimum disruption. Also several of the US claims as to specific measures being illegal were rejected."

 

No one should expect a quick resolution to the dispute, he says. "The WTO ruling has to be seen as part of a wider political negotiation. The EU is not going to bow to this ruling without similar compromises from the USA, and the scope for countersuits before the WTO is far from exhausted. You get a sense of perspective on this dispute when you realise that there are still arguments before the WTO about the relevance of data from the 1960s. This still has a long way to run."

 

Implications for KC-X and EADS's US defence prospects

 

Boeing's political supporters in Congress - most of them from states in which the airframer or its suppliers have an industrial presence - seized on the initial findings as evidence for banning EADS (which originally partnered Northrop Grumman) from the KC-X competition, and stepped up their campaign following the report last week.

 

Although the administration has always been careful to keep the arguments separate, pressure will mount on President Obama to opt for a solution that preserves the most American jobs at a time of high unemployment. EADS argues that the "only beneficiary of such a non-competitive action" would be Boeing. The losers, it claims, would include, the US military, the taxpayer and 48,000 Americans who would be employed building and supporting the A330-based tanker.

 

Massive federal bail-outs and loan guarantees for US auto makers and other industries following the banking crisis - although admittedly not for aerospace - has also weakened the moral case against government subsidies.

 

THE BACKGROUND TO THE DISPUTE

 

Airbus and its European "home" nations - France, Germany, Spain and the UK - have always been open about the fact that the airframer's programmes have been supported by the taxpayer since the consortium began building aircraft in 1970.

 

Created as an attempt to consolidate Europe's small national airliner manufacturing assets - most of them government-owned - into a rival for the USA's then big three, Airbus took many years to be taken seriously by Boeing.

 

However, by the 1990s, with its A320 family selling strongly and the A330/A340 making inroads into the long-haul market, Airbus's market share was creeping up on Boeing - by that time the only other big aircraft manufacturer.

 

A "gentleman's" agreement between Europe and the USA in 1992 - which set out ground rules for state funding of aircraft - was abandoned unilaterally by the USA in 2004 following Boeing pressure. This was just as Airbus was overtaking its rival for the first time and clocking up orders for the A380, a hugely ambitious, expensive and risky programme supported by reimbursable launch aid from European governments.

 

After the USA pushed the WTO to investigate the subsidies, Europe in turn filed a counter case, claiming that US federal research and technology grants and funds from individual states represented illegal subsidies.

 

The first panel hearing in the USA versus Europe case took place in March 2007, with the parallel European-initiated process kicking off that September.

 

Airbus's case has always been that every piece of launch aid it has received has been borrowed on comparable terms to the market, and paid back to lenders with interest, arguing that investing in the company has been a lucrative investment for governments.

 

The USA has argued that subsidies distort the market by allowing Airbus to fund riskier programmes with state guarantees against failure.

 

Source: http://www.flightglobal.com/articles/2010/07/01/343955/who-won-at-the-wto.html

[flee 5]

EADS CEO slams Boeing "propaganda," and sees WTO appeal

 

By Matthias Blamont and Lionel Laurent

Sat Jul 3, 2010 8:17am EDT

AIX-EN-PROVENCE, France (Reuters) - EADS (EAD.PA) Chief Executive Louis Gallois on Saturday slammed arch-rival Boeing's "propaganda campaign" over a World Trade Organization panel ruling and said it was a sign of fear ahead of a decision on a hotly contested U.S. aerial tanker contract.

 

Gallois also said it was "likely" that the European Union would appeal against Wednesday's WTO panel ruling, which was critical of EU export subsidies to EADS-owned Airbus.

 

"(Boeing's) propaganda campaign over the past three or four days shows they are scared that we will have a competitive offer for the tankers," Gallois told reporters on the sidelines of a conference in Aix-en-Provence.

 

EADS and Boeing are locked in a fierce battle for a contract of 179 refueling planes to replace the aging U.S. fleet of Boeing-built KC-135 tankers, which are nearly 50 years old on average.

 

U.S. lawmakers backing Boeing have called for the tanker competition to factor in the WTO ruling, which said EU export subsidies to Airbus had hurt Boeing and must be scrapped.

 

But Gallois said that 70 percent of Boeing's complaints had been rejected by the WTO and that Boeing had not proved that export subsidies to Airbus had directly affected its competitiveness or employees.

 

He also noted there was a second WTO panel ruling due on July 16 on a countersuit by the EU over U.S. support for Boeing.

 

"It seems likely to me that (the EU) will appeal (the first ruling)," Gallois said.

 

EADS will submit its tanker offer either on Thursday or Friday, in partnership with U.S. firms where sensitive defense equipment is concerned, he said.

 

A350 FEARS

 

Gallois also sought to scotch press speculation that the WTO panel ruling was pushing EADS to review EU launch aid for its Airbus unit's A350 airliner.

 

"I do not expect changes to the conditions (of launch aid)," he said, reaffirming that government loans for the A350 XWB program were not contrary to WTO rules and that the financing of the A350 program was legal in the WTO's view.

 

A Boeing lawyer has argued the WTO panel ruled government launch aid for Airbus airliners was illegal and that this applied to the forthcoming A350 -- a challenger to Boeing's 787 Dreamliner and 777 planes.

 

EADS' view is that A350 launch aid is not in the remit of the WTO panel ruling and that it does not need to be changed.

 

When asked whether EADS could take action against Boeing's statements on the WTO ruling, Gallois declined comment.

 

(Reporting by Matthias Blamont and Lionel Laurent; Editing by Susan Fenton)

 

Source: http://www.reuters.com/article/idUSTRE6620L220100703?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+reuters/businessNews+(News+/+US+/+Business+News)

[Pieter C. 5]

EADS CEO Slams Boeing "Propaganda"

 

July 5, 2010

 

EADS' chief executive Louis Gallois slammed arch-rival Boeing's "propaganda campaign" over a WTO panel ruling and said it was a sign of fear ahead of a decision on a hotly contested US aerial tanker contract.

 

Gallois also said it was "likely" that the European Union would appeal against Wednesday's World Trade Organisation panel ruling, which was critical of EU export subsidies to EADS-owned Airbus.

 

"(Boeing's) propaganda campaign over the past three or four days shows they are scared that we will have a competitive offer for the tankers," Gallois told reporters on the sidelines of a conference in Aix-en-Provence.

 

EADS and Boeing are locked in a fierce battle for a contract of 179 refuelling planes to replace the ageing US fleet of Boeing-built KC-135 tankers, which are nearly 50 years old on average.

 

US lawmakers backing Boeing have called for the tanker competition to factor in the WTO ruling, which said EU export subsidies to Airbus had hurt Boeing and must be scrapped.

 

But Gallois said that 70 percent of Boeing's complaints had been rejected by the WTO and that Boeing had not proved that export subsidies to Airbus had directly affected its competitiveness or employees.

 

He also noted there was a second WTO panel ruling due on July 16 on a countersuit by the EU over US support for Boeing.

 

"It seems likely to me that (the EU) will appeal (the first ruling)," Gallois said.

 

EADS will submit its tanker offer either on Thursday or Friday, in partnership with US firms where sensitive defence equipment is concerned, he said.

 

A350 FEARS

 

Gallois also sought to scotch press speculation that the WTO panel ruling was pushing EADS to review EU launch aid for its Airbus A350 airliner.

 

"I do not expect changes to the conditions (of launch aid)," he said, reaffirming that government loans for the A350 XWB programme were not contrary to WTO rules and that the financing of the A350 programme was legal in the WTO's view.

 

A Boeing lawyer has argued the WTO panel ruled government launch aid for Airbus airliners was illegal and that this applied to the forthcoming A350 -- a challenger to Boeing's 787 Dreamliner.

 

EADS' view is that A350 launch aid is not in the remit of the WTO panel ruling and that it does not need to be changed.

 

When asked whether EADS could take action against Boeing's statements on the WTO ruling, Gallois declined comment.

 

(Reuters)

[Pieter C. 5]

WTO report on Boeing 'subsidies' delayed; EC, Airbus 'disappointed'

 

July 9, 2010

 

The European Commission confirmed yesterday that it has been informed by the World Trade Organization that the release of its interim report on whether Boeing receives illegal subsidies will be delayed, possibly until mid-September.

 

The delay left the EC and Airbus, both of which hoped the report would counterbalance the recently released WTO final ruling on state support for Airbus, "disappointed." The WTO released a ruling late last month that sided with the 2004 claim by the US government that Airbus was given "prohibited export subsidies" to help it develop and build the A380.

 

The EC and Airbus predicted that the pending interim report on the EU's 2005 counterclaim that Boeing receives de facto subsidies through tax breaks and US government contracts, expected to be released this month, would provide a balanced view of the trade dispute.

 

The EC said in a statement yesterday that the "time lag" between the release of the report on Airbus and the delayed issuance of the Boeing report "creates the wrong impression that Airbus has received some WTO-incompatible support whereas Boeing has not. Only when we have received both panel reports will both sides have a more complete picture of the dispute...at the moment we only have half the story."

 

Airbus President and CEO Tom Enders said he was "surprised and disappointed" by the delay. He commented that new aircraft manufacturers in China, Russia and Japan are "government-sponsored players, leaving Boeing and Airbus as those that, by any objective measure, benefit least from government support."

 

He added that the WTO interim report, once released, "will show Boeing has received billions of dollars in WTO illegal subsidies."

[Pieter C. 5]

EU Trade Chief Wants US Talks Over Airbus Tanker Bid

 

July 14, 2010

 

The EU's trade commissioner said a ruling over Airbus's bid to supply tankers to the United States was politically-motivated and that he wants to talk to US Trade Representative Ron Kirk about it.

 

EU Trade Commissioner Karel de Gucht said he believed a World Trade Organisation ruling late last month that state subsidies had given Airbus an advantage over Boeing was one sided.

 

De Gucht told Germany's Handelsblatt business daily the ruling was being used against Airbus in its bid for a contract worth up to USD$50 billion for new tankers for the US Air Force.

 

"The WTO panel on Airbus is being used against us politically in Washington, for example with the tanker deal for the US Air Force," he told the newspaper. "That is a problem, and I want to talk to Kirk about it."

 

A group of US lawmakers has demanded that the Air Force factor the WTO ruling into their decision on the tanker competition.

 

WTO judges said late last month the EU must cut prohibited export subsidies to Airbus which had injured Boeing.

 

The WTO panel concluded Airbus had been able to launch a series of passenger jets only thanks to subsidies from the EU and member states Britain, France, Germany and Spain, without which it would be a very different and much weaker company.

 

"Everyone knows that Boeing worked similarly to Airbus," de Gucht said. "Instead of state aid, there were billions of military or civilian research contracts there. We expect the WTO will recognise that by September at the latest."

 

(Reuters)

[flee 5]

WTO criticizes EU for large aircraft subsidies inaction

 

The World Trade Organization (WTO) has upheld a US claim that the European Union (EU) has failed to act on illegal Airbus subsidies, but has rejected other allegations related to the Airbus A380 and A350 programs.

The Sept. 22 WTO report is the latest chapter in a long-running, two-way battle between Airbus and Boeing over large aircraft subsidies, with both manufacturers claiming the other has received unfair advantages.

In its latest findings, the WTO panel concluded the EU and certain member states had failed to implement earlier recommendations and rulings of the dispute. It added this continues to be a “cause of serious prejudice to the United States’ interests.”

More:

http://atwonline.com/manufacturers/wto-criticizes-eu-large-aircraft-subsidies-inaction

[flee 5]

Pontifications: Hypocrisy and illegal subsidies at the WTO

 

Sept. 26, 2016, © Leeham Co.: There are two airplanes under development that are in the 150-220 passenger space.

Both are under development by companies that get state aid and make no bones about it. The aid would likely be found in violation of World Trade Organization (WTO) rules.

But the most vociferous opponent to illegal subsidies hasn’t said a peep about it.

Neither has the opponent’s rival—although this company publicly recognizes the irony of it all.

I call it hypocrisy.

More: https://leehamnews.com/2016/09/26/pontifications-hypocrisy-illegal-subsidies-wto/